INSIGHTS: MEANINGFUL REGULATORY REFORM NEEDED IN NAFTA MODERNIZATION
By Guest Columnist Barry Carpenter:
President and CEO of the North American Meat Institute. Reprinted with permission.
As negotiators prepare to meet next week in Montreal, Canada for another round of North American Free Trade Agreement (NAFTA) modernization talks, the U.S. meat industry remains steadfast in advocating a “do no harm” approach to agricultural trade. Our passionate defense of NAFTA comports with the Trump Administration’s vision of a more equitable deal for Americans and a prosperous U.S. economy, and is aimed at helping the Administration achieve that vision. As the largest sector of agriculture, the meat industry views open and fair trade policy as the fuel in American agriculture’s economic engine.
Because these negotiations are critical, we welcome improvements to the 23 year old pact that will more effectively address existing and emerging challenges and opportunities in today’s interconnected, digitized global trade environment. A successful modernization, though, must preserve the core tenets of the agreement that yielded highly integrated supply chains in the meat and livestock industries and exponentially expanded meat trade within the North American market in the past two decades.
The evidence underscoring NAFTA’s boon for the U.S. meat industry is irrefutable.
Since its entry into force in 1994, U.S. beef exports to Canada and Mexico grew from $656 million to more than $1.7 billion in 2016, while pork exports increased in value from $322 million to more than $2 billion during that same time period. In terms of volume, Canada and Mexico imported 27 percent of total U.S. beef exports and 40 percent of all U.S. pork exports in 2016 – figures that would have been unattainable without NAFTA.
Mexico and Canada are now top-four destinations for U.S. beef and pork. In fact, Mexico is the leading destination for U.S. beef variety meat, and in 2016, U.S. pork exports to Mexico set a fifth consecutive volume record, totaling 730,316 metric tons.
Behind these numbers are the hardworking meat industry employees whose livelihoods depend on a robust NAFTA. Many experienced rising incomes, additional job opportunities and stronger local economies – goals the industry and Administration share – following NAFTA implementation. Moreover, consumers in all three countries now enjoy the safest, highest-quality meat supply in the world.
Renegotiation efforts must, therefore, preserve these gains, many of which were made possible through NAFTA’s zero-tariff market access for U.S. meat products in Canada and Mexico. Protecting and building upon this preferential access is essential to the continued strength and future growth of an industry that accounts for 5.6 percent of gross domestic product and supports 5.4 million jobs. This will better position the industry to withstand stiff global competition from increasingly strong competitors like the European Union and Australia.
The ability to sustain this momentum in the meat sector depends upon negotiators’ commitment to remove remaining technical and non-tariff barriers that undoubtedly undermine U.S. exports. This includes updating NAFTA’s sanitary and phytosanitary (SPS) chapter to ensure science-based SPS measures are developed and implemented in a transparent, predictable and non-discriminatory way, including adoption of enhanced enforcement mechanisms to counter unjustified SPS barriers.
The negotiations also present a real opportunity to promote regulatory cooperation and convergence of mutually recognized standards, like the establishment of a common “window” for an E-document transmission and communication system in the NAFTA region to facilitate review and clearance of meat shipments crossing common borders. Such a system would greatly improve border-crossing times by cutting unnecessary red tape and avoiding routine inspection issues.
Maintaining consistent standards for animal health certification and adopting enhanced intellectual property rights that prevent misguided restrictions on commonly used meat terms in agricultural trade would further advance efforts to align regulations.
Reconciling and reducing existing regulatory impediments will simultaneously lower production and shipping costs and enhance food safety and animal health in the North American market – an outcome that will benefit U.S. businesses and consumers, alike.
We remain optimistic the Administration’s commitment to American agriculture and its track record of eliminating onerous regulatory burdens will produce an agreement that facilitates cooperation with our closest trading partners; accelerates U.S. economic growth; and further deepens, not restricts, cross-border trade in livestock and meat products, which exceeds $16 billion annually.
Moving forward, let’s remain positively engaged in a constructive dialogue that safeguards the core policies that have strengthened the U.S. meat sector and overall economy, while seizing opportunities to forge an agreement that improves outcomes for all Americans.
ON THE ECONOMY: BANG THE DRUM ALL DAY
By John Dunham, Managing Partner:
John Dunham & Associates
Ever since I was a tiny boy, I don’t want no candy, I don’t need no toy. I took a stick and an old coffee can, I bang on that thing til I got, blisters on my hand. Because – I don’t want to work, I want to bang on the drum all day. Yes, I do. I don’t want to play, I just want to bang on the drum all day. So go the lyrics to the 1983 single by Todd Rundgren. Interestingly, since he did not want to work, all of the instrumentation on the song is performed by Rundgren himself.
This song could be the current anthem on the American workforce. Following the end of World War II, about 56 percent of working age Americans were in the labor force. This Labor Force Participation Rate (LPR) held fairly steady (with certain ups and downs) until the end of the 1960s. This is the classic Leave it to Beaver/Father Knows Best period in the country, when men went to work and most women stayed home and raised families. It was also the period of the Baby Boom.
Then beginning in the late 1960s and continuing through the end of the last century, the labor force participation rate skyrocketed, reaching nearly 70 percent. Society seemed to revolve around the double income household. It was the period of Yuppies, DINKS, Balloon Houses and Pets.com. Lifestyles shown in TV shows like LA Law, and movies like Bright Lights, Big City, were the goal.
Things started to change with the turn of the Century. Granted the country was attacked on September 11, 2001, and has been at war since, but the LPR actually began falling prior to then. LPR fell prior to the short 2002 recession, and continued to fall at an accelerating pace through the recession of 2008 and 2009. More interestingly, the percentage of the working age population interested in… well working, continued to fall through 2015, reaching a low of about 62 percent in September of that year. During this period of rapid expansion in the LPR, the population of the United States underwent a baby boom that was even larger than the post war boom. In fact, the Millennial Generation is the largest in US history. But the labor force participation rate did not fall when Millennials were kids, but rather after they started going to middle school and even college. It is unlikely that this caused the decline in labor force participation.
If it’s not more women having kids, what is it that is taking people away from work and having them bang on the drum all day?
For one thing, it does not appear to be a lack of available jobs. Unemployment rises and falls with the economy but it in no way mirrors the long swing in labor force participation. While total employment growth has moderated since the turn of the century, this is just a mirror of the fall in participation.
According to a paper by the Federal Reserve Bank of St. Louis, the largest decline in labor force participation during the period was among young people. The paper suggests LPR for those between 16 and 24 years of age generally mirrored that of the population, increasing more or less steadily between the mid-1960’s until the mid-1980’s. LPR stayed above 65 percent until 2000 when it began a sharp decline, stabilizing at around 55 percent today, a full 10 percent below the national average. According to the Bank, since 1998 most of the decline in youth labor force participation corresponds to an increase in school attendance, something that bodes well for future.
While some have suggested that the decline in the overall LPR is due to the aging of the baby boom generation, the statistics do not seem to bear this out. Generally, the LPR is higher now than during the peak years of the late 1990s for older people, nearly double for those over retirement age. It is only in the younger generations that the LPF is falling – down from 84 percent in 1996 for prime working age adults to 81.6 percent, and down by 10 percentage points for younger people. Millennial unemployment is between 50 and 100 percent higher than the overall unemployment rate, so in effect, the baby boom generation has not been replaced by Millennials in the labor force at the expected rate.
Again, the question is why?
Perhaps the social stereotypes of the generations have some truth to them. Stereotypically, this is a generation with high expectations and a degree of overconfidence that makes it a poor match for low-paying, low-satisfaction entry level jobs, and without entry level experience, its difficult to find the dream job that they think they deserve. Millennials also have come out of college with huge debt loads, making a low paying job a liability.
Our own experience shows that many people of this generation are inwardly focused and do not have great workplace communication and general office skills. Since few had jobs before school, they simply did not have the opportunity to develop these.
The bottom line is that the expansion that is guaranteed to come about because of the recent tax bill will create thousands of new employment opportunities, and the only people that will be available to meet the demand will be Millennials. As employers and employees adapt to each other we will likely see the LPF begin to increase again. They may not want to work, but sheer demand will force people back into the labor force, they won’t be able to bang on the drum all day.
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